Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) said Tuesday it will acquire the remaining 77.4% of the outstanding shares of Burlington Northern Santa Fe Corporation (BNI) for $26.6 billion in cash and stock. The deal, which is valued at approximately $44 billion and includes $10 billion of outstanding BNSF debt, marks Berkshire’s biggest acquisition ever.
Berkshire Hathaway said it will pay $100 a share in cash and stock for the rest of the company, a 31.5%premium on Burlington Northern’s Monday closing price of $76.07. The shares rose almost 30% to mid $97 levels in pre-market trade.
“Our country’s future prosperity depends on its having an efficient and well-maintained rail system,” Warren Buffett said in a statement. “Most important of all, however, it’s an all-in wager on the economic future of the United States. I love these bets,” he added.
Under the deal, BNSF stockholders will have the choice to convert each share for either $100 in cash or receive a variable number of Berkshire’s Class A or Class B stock. Even though the majority of the stock in the acquisition will be Berkshire’s “A” shares, the conglamorate’s board approved a 50-for-1 split of its Class B stock (first issued on May 8, 1996) for holders of smaller amounts of Burlington shares who opt for a share exchange rather than cash. With the split, each Class B share will be worth $65.30.
“I’m not big on stock splits, but by having this split, it enables anybody with as little as one share of BNSF to opt for the tax-free exchange,” said Buffett. “So the small shareholder can have the exactly the same availability that otherwise would only have been available to a big shareholder.”
Burlington Northern last month reported third-quarter profit dropped 30% to $488 million, or $1.42 per share, as the company posted lower revenue and volume across all businesses.
The acquisition has been approved by the boards of both companies and is expected to close in the first quarter of 2010.
